The TrendFlex Score

Each week, while the main market trend represented by the S&P 500 is in force, Baseline Analytics reviews its key financial indicators to assess the risk to the main market trend. A weighted score is derived from these indicators to define an investment strategy. These indicators are organized into several categories: 

  • Index Reviews (S&P500, Dow, Nasdaq)
  • Internal Market Strength (i.e. Price and Earnings Momentum)
  • Market Psychology
  • Economic Sector Relative Earnings Strength
  • Credit spreads (Government vs. Corporate)
  • Intermarket Relationships (bonds, commodities, stocks) and relative risk premiums
  • Style (small cap, large cap, value and growth)

The TrendFlex Score ranges from 1.0 to 3.0. At extreme readings (above 2.60 and below 1.40), the probability of a market trend change is high. TrendFlex does not attempt to pick tops and bottoms, but keeps an investor on the right side of the trend for the longest period of time.  Depending on the TrendFlex Score and the relationshp to its three-week moving average, subscribers may initiate various tactical strategies to protect or enhance portfolio returns.  Baseline Analytics presents its Portfolio Options Table each week to suggest tactical positioning of investments.

For example, a high TrendFlex Score such as 2.60 would suggest that a short-term market pullback is about to end.  Strategies that abide by this score include hedging short positions (or taking profits on shorts), wading into long positions, etc.  As can be seen in the TrendFlex Score chart below, the TrendFlex Score has identified short-term market turning points since its inception in 2010.  As a subscriber, you will receive a weekly TrendFlex Score update on the weekend, as well as intra-week updates as market conditions warrant.  View the video presentation of the TrendFlex Score.

Click here for enlarged chart

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Here is another view of the TrendFlex Score.  The chart below (click on chart to enlarge) depicts the TrendFlex Score as vertical bars plotted with the S&P 500.  Note that a shift from positive to negative bars (bars that stretch below the "0" horizontal line) tend to precede an uptrend in the S&P 500.  

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A bullish environment exists when the TrendFlex Score is below its moving average, as this denotes.  Bars that shift from negative to positive tend to precede a downtrend in the S&P 500, as the TrendFlex Score is above its moving average.  These shifts above and below its moving average are utilized to signal a trend shift, with the absolute TrendFlex Scores helping to characterize the risk to a trend shift.

 

The TrendFlex Signals

The TrendFlex Signals include the TrendFlex Credit Risk Premium Signal (CR) and the TrendFlex Trend-Following Signal (TF).  Both of these signals include a short to intermediate-term signal (Classic) and a long-term signal (Allegiance).    The Allegiance and Classic signals are updated each weekend, prior to the market open the following week, or more frequently as market conditions warrant.

Click here for a more detailed description of the TrendFlex system.

The TrendFlex Signals have outperformed a buy-and-hold strategy of the S&P 500 by up to 3x, as can be seen on our Results page.  


Portfolio Options Table

The Portfolio Mix Table provides investment guidance based on the trend (bullish or bearish) and the degree of risk for that trend to continue. For example, the current trend noted above is Bullish but at an increased risk of a pullback. In this scenario, investors are encouraged to continue to seek quality equities consistent with the uptrend in place  (i.e. growth at a reasonable price), but to protect profits and partially-hedge their portfolio:

 

Portfolio Strategies
Reduce Longs
 Sell Calls
 Hedge Longs
Set Stops on Longs
Short Overbought Equities
 Add to Longs
Sell Puts
Hedge or Reduce Shorts
 Long Futures and Options

 

As a subscriber  to Baseline Analytics TrendFlex Premium Services, you will receive a weekly update of the TrendFlex Signal, the TrendFlex Score, and a recommended portfolio strategy based on the collective suggestions of these market trend and risk indicators. In addition, timely trades and investments, including upcoming ex-dividend opportunities, will be presented based on our daily scanning of over 5,000 stocks and ETF's. That's all there is to it! TrendFlex was designed to be a simple, market trend-following system to guide investment decisions.